In a first-of-its-kind indictment, two individual corporate officers have been criminally charged for an alleged willful failure to timely report a potential hazard to the U.S. Consumer Product Safety Commission (CPSC).
The Consumer Product Safety Act (CPSA) gives the CPSC the authority to pursue both civil and criminal penalties for violations of the statutes it enforces. The CPSC has gone after alleged violators criminally for other issues – usually alleging repeat importation of banned products – but has never sought criminal punishment for allegedly violating Section 15 of the CPSA, which requires companies to report information suggesting their products may be defective, noncompliant, or hazardous.
In this instance, the CPSC – through the Department of Justice’s Consumer Protection Branch – has accused two apparently former executives of Chinese appliance manufacturer Gree Electric Appliances for failure to report fire hazards in dehumidifiers. The astute CPSC observer will recall that, in 2016, Gree agreed to pay what is still the highest CPSC civil penalty stemming from a single failure-to-report allegation. Clearly, that civil settlement was not the end of the matter.
As would be expected to produce two extraordinary government actions, the indictment alleges far more than the garden-variety timely reporting problem. It accuses the executives of willfully keeping quiet despite both consumer and testing data demonstrating a fire risk, of misleading the CPSC, insurers, and retail partners, and of falsifying product certifications.
If convicted, the executives each face up to five years in prison and substantial fines. The indictment serves as a startling reminder that, when company officials make decisions about how to handle potential product safety issues, the stakes include not just brand reputation but their own individual liberty.